Dollar Mixed as Risk Aversion Persists…

Another day has passed, with markets still not sure how to take the latest efforts by officials to fight the recent crisis. Yesterday we said that markets were more positive about the economic outlook and we saw big gains in DOW JONES and NIKEI since Monday. However, come today and things start again to look a bit bleak as European markets are falling and risk aversion is still visible. We did say that until we see a major swift in recent sentiment, market participants will remain wary.

EUR/USD didn’t manage to break 1.3780 and corrected since then all the way down to 1.3540. At the time of writing the pair is back above 1.36 however if 1.3630 doesn’t give way we might see more weakness during the day. Traders are not sure which way to go yet and as a result the pair is trapped between 1.35-1.38 for the last few days. Only a clear break out of these levels will show us the next move.

Today’s economic calendar has a few important releases, with US PPI and retail sales the ones to watch. Both data are expected to bring some kind of action, with retail sales the one that traders will monitor closely. Although in the last few weeks economic data don’t seem to play an important role in what moves the market, nevertheless if the data are positive for the US economy, traders will be happy to buy the dollar once again. Also later on today we have Bernanke speaking again in New York, about the economic outlook and once again traders will monitor his words in order to see what FEDs plans are for the next meeting. Analysts are saying that the US dollar could suffer a few losses in the coming days if the economic data show further deterioration in the economy and slowing growth.

It will be interesting to see how the markets will react later on today after New York open and if risk aversion continues through the day. So far, the yen currency seems to be thriving since early morning as traders once again exit risky positions and buy the yen back. The fear and uncertainty remains the new theme for markets all around the world for a while now and might continue for some time.

GBP/USD is trading within 1.73-1.76 however the pair has to take out 1.7580 and 1.7630 in order to say that the move will continue and more gains are in for the pair. As long as 1.7280 is kept intact, the pair has more room to advance higher.

Let’s see how the markets will react today to the releases and if DOW JONES will move higher despite the mixed sentiment which traders have adopt in the last few days. Don’t forget that things are much more complicated after the new rescue plans, which have been presented to us from world leaders and until we see some kind of results, anything is possible…